Could Obamacare 2.0 Come From the South?

The political noise surrounding the Affordable Care Act (ACA), or “ObamaCare”, makes it difficult to get a good sense of what is really happening on the ground as states implement the legislation with varying degrees of enthusiasm and success. That difficulty underscores the importance of a project being undertaken jointly by the Brookings Institution, the Rockefeller Institute of SUNY, and the Fels Institute of Government at the University of Pennsylvania. The project draws on a network of researchers to track the implementation of the ACA in 35 states.

In late August, at a televised event in Washington, the project released a group of reports on Alabama, Florida, Kentucky, Maryland, South Carolina, Texas and West Virginia. When it comes to expanding Medicaid or managing exchanges under the ACA, the summary report on these southern states characterizes the general mood as “turbulent opposition”, ranging from strident resistance to just a preference to keep Washington at arm’s length. The opposition has not always been simply partisan or ideological, notes the report. Concerns about a state’s financial and managerial capacity to expand coverage have often been a key factor.

So looking ahead, how might implementation of the ACA evolve in the South? Well, let’s bear in mind that there will be changes in Washington over the next few years. The November election could alter the balance of power in critical ways that will influence regulatory and possible statutory amendments to the ACA. Moreover the 2016 election will result in a new White House that – at the very least – has no pride of authorship regarding the ACA. In this environment, we could see at least three important patterns developing.

First, there will likely be several “private option” proposals for Medicaid expansion, in which states seek waivers to use federal Medicaid expansion funds to enroll beneficiaries in private exchange plans rather than traditional Medicaid. In addition to the Arkansas version of the private option, such other southern states as Florida, South Carolina, Tennessee and Texas have explored the approach. So have states in other regions, with Pennsylvania recently winning approval from the Obama Administration for a version.

Private option waivers of this kind could well become an acceptable way for southern states technically to expand Medicaid while in practice achieving wider private coverage for lower-income families by subsidizing the purchase of private plans. Depending on future national elections, this pattern could help lead to broader reforms of Medicaid that would permit much greater use of private plans within an exchange framework.

A second pattern might be the greater customization of federal exchanges, such that the “federal” and “state” distinction becomes fuzzier. Some southern states defaulted to a federal exchange more because of worries about their own capacity to design and manage an exchange than because of an opposition to exchanges in principle. As the federal exchanges settle down and states become more comfortable with them, some states may seek a greater role in running and modifying “federal” exchanges, perhaps with some of these exchanges essentially becoming state operations.

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And third, let’s remember that, in 2017, Section 1332 of the ACA takes effect. This provision permits states to apply for sweeping waivers from the ACA, including exemptions from the individual mandate, the employer mandate, many constraints of the essential benefits, and even the requirement to have an exchange, provided that the state can achieve the broad coverage goals of the law. Little wonder that former Ted Kennedy senior adviser John McDonough describes the provision as “state innovation on steroids” and as “a significant and unpredictable game changer” for future reform.

True, some sponsors of the 1332 saw it as a way to sneak in a single payer system down the road in Vermont and possibly other states. But the same provision could allow more conservative southern states to craft very different health systems in the future under the loose framework of the ACA.

Does this mean today’s foot-dragging South could become the pace-setter for a radically altered ACA? Maybe so. Stay tuned.